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Trade Costs, CO2, and the Environment

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  • Joseph S. Shapiro

Abstract

This paper quantifies how international trade affects CO2 emissions and analyzes the welfare consequences of regulating the CO2 emissions from shipping. To this end, the paper describes a model of trade and the environment, compiles new data on the CO2 emissions from shipping, and estimates key parameters using panel data regressions. Results show that the benefits of international trade exceed trade's environmental costs due to CO2 emissions by two orders of magnitude. While proposed regional carbon taxes on the CO2 emissions from shipping would increase global welfare and increase the implementing region's GDP, they would also harm poor countries.

Suggested Citation

  • Joseph S. Shapiro, 2016. "Trade Costs, CO2, and the Environment," American Economic Journal: Economic Policy, American Economic Association, vol. 8(4), pages 220-254, November.
    • Handle: RePEc:aea:aejpol:v:8:y:2016:i:4:p:220-54
    Note: DOI: 10.1257/pol.20150168
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    More about this item

    JEL classification:

    • F18 - International Economics - - Trade - - - Trade and Environment
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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